Example 12: Let us consider a corporation subject to tax @ 35 percent having an equity beta of 1.30. The corporation can be assumed to be financed by a combination of debt and equity, wherein 25 percent of the financing comes from debt and balance from equity. Let us now assume that the corporation intends to changes its capital policy and introduce a capital structure having 33 percent debt with residual component from equity. Using the above concept we can calculate corporations new equity beta. Example 12: Let us consider a corporation subject to tax @ 35 percent having an equity beta of 1.30. The corporation can be assumed to be financed by a combination of debt and equity, wherein 25 percent of the financing comes from debt and balance from equity. Let us now assume that the corporation intends to changes its capital policy and introduce a capital structure having 33 percent debt with residual component from equity. Using the above concept we can calculate corporations new equity beta